They're out there, again, constantly searching for and scooping up South
Florida homes at steep discounts, hoping to turn a nice profit. A house might
barely have time to get listed before it's gone  that is, before it's back
on the market a few months later at a 20%, 30% (do I hear 50%?) markup.

Yes, the home flippers are back, beginning to dominate the real estate
landscape in one of the epicenters of the housing crisis. Sounds like 2003
all over again? Are they harbingers of another housing free fall? (See the best business deals of 2009.)

Real estate analysts say not to panic  yet. This new cohort of investors is
kinder, smarter, less predatory. It might even mark the era of what experts are calling "the good
flipper." "The first group blew it  they don't have any money left," says
Bradley Hunter, who heads the South Florida office of Metro Study, a housing-consulting firm. "The current group of investors is made of [genuine]investors and not momentum flippers."

Those who bought seven years ago didn't care how high the price might be they just assumed the price would keep going up. Things are different now.
"Today's investors are saying, 'It's all about the price,' " Hunter says.
Jack McCabe, a real estate consultant in Deerfield Beach, Fla., agrees.
"These are not the cocktail-party investors of 2005," he says. "Today's
flippers are generally long-term real estate investors with war chests of
cash who were waiting for the debacle to unfold and for the opportunities it
would present."

The current crop of investors, analysts say, are playing a crucial role in
reviving the housing market, buying up homes that have been foreclosed on  and
often torn up by the previous owners  and getting them back into shape.
Many former owners hauled appliances away and ripped out the wires. Some got so boiling mad that they pulled off cabinet handles and smashed glass doors. Somebody's got to clean up those messes, and that's what the good flippers do, observers say. They might try to sell right away or rent the houses for a while. Either way, it's good for the whole neighborhood, because a house that might have sat fallow is now rehabbed, preventing drops in value all around it.

"They're vital," Hunter says of the good flippers. "I can't think of a conceivable way that we could turn the market
around without them."

A group of investors that goes by the name Pudlit has bought up 59 homes in
Palm Beach County since the fall. A three-bedroom house that the group
bought in September for $95,700 is back on the market for $148,900  a 55% bump. David Dweck, an investor and mortgage broker who founded the
Boca Real Estate Investment Club in the 1990s, says he's done 50 deals over
the past year as either the buyer, the broker or the lender. "Are you
sitting down?" he asks, then describes a three-bedroom house he just
snatched up, in the admittedly "spotty" West Palm Beach neighborhood of
Northwood Hills, for $26,000. "It's got great potential," he says. "I can either sell it or rent it. It doesn't matter to me."

But even Dweck cautions against placing halos over South Florida real estate investors. Are
some people out strictly for the quick hit that will inflate prices
artificially? "Without a doubt," Dweck says. "We are in the fraud capital of
the country." Even good flippers sometimes cut corners on home
improvement, putting new doors on old cabinets in one Pudlit house  just in time for potential
buyers to be escorted on a tour.

And there is still troubling game playing afoot, observers say. At
a courthouse foreclosure auction, when a novice buyer has his heart set on a property
that more seasoned buyers deem undesirable, sophisticated investors will routinely team up and place bids designed to jack up the
price. The novice will get his house, but he'll have
overpaid. That means he'll have to put a higher resale price tag on it to get a return on his investment, offering less competition to the
more seasoned buyers who will have paid less for their homes. It also means
less competition on other purchases, since the novice buyer might have put
all his eggs in one overpriced basket. "That happens all the time," says
Dweck. "They'll bid 'em up, let 'em have it, and laugh."

What's more  since "cash is king," as McCabe puts it  even good flippers can make things more
difficult for the traditional buyer who needs to borrow. "It's difficult for those buyers to get the properties
that they want," says Yanmei Li, an assistant
professor in urban and regional planning at Florida Atlantic University who is researching the resales of
foreclosed homes in Fort Lauderdale. "Sellers are willing to sell to the
cash buyer even if it's a little bit lower than they want."

Artificial price inflation might be more prevalent than is generally
acknowledged, she adds. For example, one Fort Lauderdale home she came across was bought from the bank at $60,000, then sold four days later for $20,000 more. That smacks of an unreasonable hike, though she
acknowledges the bank may have simply wanted to unload it at a
bargain-basement price. "Once the price is inflated on one property,
the surrounding properties' prices will also be inflated," Li says. "I'm a
little concerned that the prices might be more inflated in two or three
years because the investors are doing that."

Li notes that lazy appraisals that take into consideration only price
comparisons  rather than looking closely at the actual quality of the housing
stock  are also to blame for the prospect of artificially inflating the
market. In short, she says, the same age-old advice holds true: "The buyer
has to be educated about the buying process." Which might go a long way toward preventing what got us into this mess in the first place.